Too Many Inquiries on my Credit Report
A very common quote on a credit report is “Too many recent inquiries in the last 12 months”. But as you look through your report you only see a few inquiries listed. So how and why in the world is your credit report telling you that you have too many inquiries, and how is this really affecting your credit score?
Depending on your exact credit profile, there are a specific number of permissible inquiries which can be made before your credit sore begins to suffer as a result. Going over this limit will prevent you from having as high of a credit score as you could otherwise have, as well as the notification on your credit report that you have had too many inquiries.
Trying to secure multiple credit lines makes you perceived as a greater credit risk; this is why the number of inquiries made is taken into account when calculating your credit score. Each of these inquiries reflects a request which has been made by a lender for your credit report. Inquiries are treated differently depending on who makes them and why however, with not all inquiries having the same effect on your FICO score.
Usually, one additional credit inquiry will take less than five points off of your credit score. Six inquiries or more on your credit report can be perceived as the fact that you are eight times more likely to declare bankruptcy than people with no inquiries on their report.
When determining your FICO score, this is how inquiries are factored in:
FICO scores know that people shop around more these days for credit, so they do take that into consideration and will distinguish between a search for many new credit accounts and rate shopping for one new account. FICO scores usually will distinguish between a search for a single loan and a search that you do for many new credit lines, in part by the length of time over which inquiries occur. When you need an auto or home loan, you can avoid lowering your FICO score by doing your rate shopping within a short period of time, such as 14 days. But be careful, because some research shows that opening too many credit accounts in a short period of time can increase your risk of hurting your score- especially if you don’t already have some well established accounts that provide great length of history.
The number and type of accounts which you currently have open will also be considered when calculating your FICO score, as well as how much time has passed in between opening new accounts.
While any inquiries made will remain on your credit report for two years, your FICO score only takes inquiries from the previous year into account. The most recent inquiries are considered to be the most important; FICO scores include only those inquiries which genuinely represent an increased credit risk.
Your FICO score will ignore many inquiries entirely. These inquiries include your requests for your own credit report and score from the credit reporting bureaus, inquiries made when making a pre-approval and inquiries made as part of an employment screening process are also ignored in terms of your FICO score. All of these inquiries will appear on your credit report, but do not affect your score.
